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You work for a company that produces bespoke watches for a variety of makers. You primarily use an older swiss turning centre to produce several

You work for a company that produces bespoke watches for a variety of makers. You primarily use an older swiss turning centre to produce several of the key components but are looking to upgrade the machine as it is breaking down regularly. The vendor for the machine provides two options:

  1. you can purchase a new machine for $228,271 right now, or
  2. you can get the new machine for free today, but you will have to pay for it in 3 years at a cost of $228,271 plus an extra 300k for deferring the purchase (all due 3 years from now).

Inflation has average around 3% per year, and your company uses an MARRR of 12% per year for economic valuations. If you want to compare both options 3 years from now, what is the difference between Plan 2 and Plan 1 from a cost perspective? Enter your answer in the box below, remember your sign convention.

Should they purchase now or later? Why?

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